Around this time last year we published our blog post “Preparedness, Not Prediction”. You can read it here.
We opened: “It’s that time of year when economists and market “experts” lay out their predictions for GDP, inflation, stock returns, interest rates and everything else you can imagine for the year ahead…
Our advice when it comes to these predictions – ignore them all. Most are wrong, some are laughable. But all are designed to fill airtime and magazine columns.”
We could simply repeat what we wrote last year and call it a day but where’s the fun in that?
However, it is a fun exercise to go back and look at some of the S&P predictions for 2024. Pasted below are the end of year S&P target from some of the best and brightest on Wall Street.
So, where did the S&P finish? 5,881. That’s right, it closed the year over 15% higher than the most bullish estimates from the Wall Street banks.
This example is not to accuse Wall Street of being idiots. They’re not. They have more data and expertise than most anyone in the world. And despite that, they were materially off base.
Stealing from Bob Seawright’s Better Letter “2024 Forecasting Follies:”
Predictions have a long and ignominious history, especially about the future.
In 1876, the President of Western Union, William Orton, dismissed the telephone as a “toy” when Alexander Graham Bell offered to sell him the patent for $100,000. According to Orton, “The idea is idiotic on the face of it. Furthermore, why would any person want to use this ungainly and impractical device when he can send a messenger to the telegraph office and have a clear written message sent to any large city in the United States
In 1995, Robert Metcalfe, founder of digital electronics company 3Com, said: “I predict the internet will soon go spectacularly supernova and in 1996 catastrophically collapse.” According to the latest available data, the average person spends about seven hours per day on screens connected to the internet.
In 2007, Steve Ballmer, then the CEO of Microsoft, said, “There’s no chance that the iPhone is going to get any significant market share. No chance.” There are 46 iterations of iPhone and about 1.4 billion users
We’re dreadful at predictions. As my friend Mark Newfield likes to say, the Forecasters’ Hall of Fame has zero members.
With so much that is out of our control, it’s imperative we spend our time, energy, and attention on these key principles:
1) Always maintain a “margin of safety”
2) Don’t make big bets (diversify)
3) Maintain optionality
4) Exercise humility and discipline
5) Focus on things you can control
Happy New Year to everyone and thank you for the trust you continue to afford our organization.
Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and Firm Name makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision.